The Infinite Game

ability to recognize false causes can also save us pain as investors, employees and consumers. If we suspect that one organization does not have a Just Cause, we can move on to another that does. A true Just Cause is deeply personal to those who hear it, and it must be deeply personal to those who espouse it. The more personal it is for people, the more likely our passions will be stoked to help advance it. If the words of a Just Cause are used simply to boost a brand image, attract passionate employees or help drive some near- term goal, like a purchase, a vote or support for the company, the impact will be short lived. As soon as we start working at an organization or interacting with its people, we will quickly find out whether they are offering us a Just Cause they truly believe in or just hollow words. Moon Shots Are Not a Just Cause He offered us something to believe in. Something that was bigger than us. Something that we were willing to sacrifice to see happen. “We choose to go to the moon,” said President John F. Kennedy with determination. “We choose to go to the moon in this decade . . . not because [it is] easy, but because [it is] hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win.” And just over eight years after Kennedy first challenged the nation, Neil Armstrong took “one small step for a man, one giant leap for mankind.” The so-called moon shot is often invoked by leaders who are trying to inspire their people to reach for something that seems impossible. And because moon shots pass most of the tests of a Just Cause, it usually works. In the case of Kennedy’s actual moon shot, it is affirmative and specific. It is inclusive, service oriented and definitely worthy of sacrifice. However, it is not infinite. No matter how hard the challenge, no matter

how impossible it seemed, the moon shot was an achievable, finite goal. More than an ideal future state, it is what Jim Collins, author of Good to Great and Built to Last, calls a BHAG, a big, hairy, audacious goal. It’s easy to mistake a BHAG for a Just Cause because they can indeed be incredibly inspiring and can often take many years to achieve. But after the moon shot has been achieved the game continues. Simply choosing another big, audacious goal is not infinite play, it’s just another finite pursuit. During employee town hall meetings at GE, some of the employees would express concern that the company was too focused on the short term. Jack Welch, then CEO, was fond of replying, “Long term is just a series of short terms.” When employees express such a concern to a CEO, more likely than not what they are really asking is: “What’s this all for?” What is all our hard work contributing to beyond the metrics and material rewards? Welch’s answer revealed that, to him, there was no higher cause at play. The goal was simply to perform, perform again and perform again. To Welch, each finite accomplishment was enough. Except, business is an infinite game, which means the series of short terms never ends. Indeed, leaping from goal to goal can be fun for a while, but if that’s all there is, over time the thrill of each achievement becomes less, well, thrilling. I often meet senior executives who seem to suffer from a kind of “finite exhaustion.” Because they did well and were paid well for hitting each goal set for them, they kept repeating that pattern. At some point in their careers, they traded any fantasy of feeling like their work would contribute to something bigger than themselves for a rat race or a hamster wheel or some other unfulfilling running rodent metaphor. Racking up finite wins does not lead to something more infinite. The question that a Just Cause must answer is: What is the infinite and lasting vision that a moon shot will help advance? A Just Cause is the context for all our other goals, big and small, and all of our finite

achievements must help to advance the Just Cause. Indeed, if we become overly concerned with a finite goal, no matter how inspiring, we leave ourselves open to making decisions that are only good for the finite but may do damage to the infinite. Kennedy’s moon shot was made in the context of the larger infinite vision that America’s Founding Fathers laid out—that our progress is not for the benefit of a few, but for the benefit of many. In the sentences before Kennedy proposed his moon shot challenge, he offered the infinite context for the finite objective, “We set sail on this new sea because there is new knowledge to be gained, and new rights to be won, and they must be won and used for the progress of all people.” This was his belief for a good many of his objectives, including landing a man on the moon and returning him home safely. Though moon shots are inspiring for a time, that inspiration comes with an expiration date. Moon shots are bold, inspiring finite goals within the Infinite Game, not instead of the Infinite Game. Being the Best Is Not a Just Cause “We will be the global leader in every market we serve and our products will be sought after for their compelling design, superior quality, and best value.” This is a pretty typical-sounding corporate vision or mission statement. This one belongs to Garmin, the maker of GPS devices for everyone from runners to pilots. Though there are dozens of variations, the basic formula is the same— we’re the best and everyone wants our products because our products are the best . . . and “they’re great value” (gotta squeeze that in). Again, vision or mission statements act like compasses. They guide our direction. However, because there are no standards on how to write such statements, ones like the above have become too common. Broad and

generic, they offer little to no value to a company that wants to adopt an infinite mindset. “Being the best” and statements like that are egocentric statements that place the company as the primary subject (and thus the primary beneficiary) of their vision. They don’t help make the company relevant to those who buy from the company. In fact, any mention of the customer or any offer of value usually comes at the end of the statement. By putting the egocentric statement first, it directs leaders to focus their efforts inward and not on actual people who may buy the product. And just because people may buy or like the product does not mean they believe in or even know what the Cause is. Leaders with a finite mindset often confuse having a successful product with having a strong company. Which is a little like the owners of the Los Angeles Lakers thinking their team is relevant because LeBron James has relevance. Having a great player, a popular product or a killer app does not mean we are equipped for the Infinite Game. Vision statements that place the product at the center of the vision are only useful so long as nothing better ever comes along, there is never a deviation in market conditions and no new technology is ever invented. If, however, any of these things does happen, the company will be left with a vision statement that often leaves them clinging on to an old business model and blind to the opportunities they could have captured. This seems to be what happened to Garmin. In 2007, Garmin may have been “the best,” the global leader in dash-mounted GPS units for cars and boats. However, as smartphones became more reliable and more capable, we had less need for a separate GPS unit anymore and the company suffered as a result. It is now worth less than a third of what it was worth in 2007. It’s too easy for Garmin to simply blame the rise and ubiquity of smartphones to explain their losses (which they did). What they failed to recognize is that they had a vision statement that directed them to focus on their product, and in so doing, they missed the opportunity that smartphones offered them. Had they been obsessing about how to provide the value to customers first, they

may have seized the chance to develop the go-to navigation app for mobile phones when the opportunity still existed. Their brand was certainly strong enough to do so. Instead, they continued to focus on the business model they had selling dash-mounted hardware. Now the default navigation apps on our phones are Google Maps, Waze or Apple Maps, but that didn’t have to be. A Just Cause should direct the business model, not the other way around. When a statement of vision or mission is grounded in the product, it can have adverse effects on the corporate culture also. For companies that place their product above all else, which is fairly common among technology or engineering companies, it leaves people who are not engineers or product designers feeling like (and sometimes actually treated like) second-class citizens in their own companies. An organization is better served if everyone, including those in accounting, support or customer service roles, for example, is made to feel like they are not just there to serve the needs of the engineers or product development teams. They too want to feel like valuable members of the team, working together to advance something bigger than the product or themselves. Being the best simply cannot be a Just Cause, because even if we are the best (based on the metrics and time frames of our own choosing), the position is only temporary. The game doesn’t end once we get there; it keeps going. And because the game keeps going, we often find ourselves playing defense to maintain our cherished ranking. Though saying “we are the best” may be great fodder for a rah-rah speech to rally a team, it makes for a weak foundation upon which to build an entire company. Infinite-minded leaders understand that “best” is not a permanent state. Instead, they strive to be “better.” “Better” suggests a journey of constant improvement and makes us feel like we are being invited to contribute our talents and energies to make progress in that journey. “Better,” in the Infinite Game, is better than “best.”

Growth Is Not a Just Cause Imagine you walk out of your house one morning and see your neighbor packing up his car. “Where are you going?” you ask. “Vacation,” he replies. “Nice. Where are you going?” you follow up, curious. “I told you, vacation,” he replies again. “I got that,” you say, “but where are you going?” Exasperated, your neighbor replies again, “I told you, VAY-CAY-SHUN!” Realizing that your line of questioning will not reveal the answer you’re looking for, you try a new strategy. “Okay,” you say, “how do you plan to get to your vacation?” And immediately your neighbor offers their plan. “I’m going to drive down the I-90 and my goal is to drive three hundred miles per day.” If the question asked is, “What is your company’s Cause? Why does your company exist?” and the answer offered is “growth,” that’s a lot like your neighboring responding “vacation” to the question “Where are you going?” The leaders of these growth-oriented companies can rattle off their strategies and targets for growth, but that’s like explaining which highway and how many miles you plan to travel when heading on vacation; it doesn’t paint a picture of why you set off in the first place or where you hope to go. It doesn’t offer a larger context or purpose for that growth. Money is the fuel to advance a Cause, it is not a Cause itself. The reason to grow is so that we have more fuel to advance the Cause. Just as we don’t buy a car simply so we can buy more gas, so too must companies offer more value than their ability to make money. A company, like a car, is more valuable to all constituents when it takes us somewhere to which we would otherwise be unable to go. That place we envision going to is the Just Cause. It’s worth noting that so many of the goals that companies put forward tend to be arbitrary or overly ambitious. Especially in the start-up world, the drive for billion-dollar valuations is not an indicator of a healthy company that is built to last. It is a standard that has evolved thanks to the venture capital industry (because

valuations are how they make their money). A strong culture and the ability to fund its own existence (also known as profitability) is how a company actually stays in the game for the long term. In addition, the constant drive for hypergrowth creates a problem within mature markets—markets in which the product, technology or business is no longer new or special, but accepted and ubiquitous. For companies in those markets, companies like Sears or GE, their options are unattractive if they maintain a growth-at-all-costs mentality. Many start to play defense, give their money away to shareholders to court their favor or over use stock buybacks to keep their stock price artificially inflated. Growth through acquisition or merger often becomes the only way mature, finite-minded companies can continue to demonstrate high rates of growth. This may win a short- term boost in the stock market; however, as Harvard Business Review and many others have reported, “70%– 90% of acquisitions are abysmal failures.” To offer growth as a cause, growth for its own sake, is like eating just to get fat. It pushes executives to consider strategies that demonstrate growth with little to no consideration of any sense of purpose for that growth. Just like it would affect a human being, it should come as no surprise that the organizations that eat to get fat will eventually suffer from health problems. Growth as a cause often results in an unhealthy culture, one in which short-termism and selfishness reign supreme, while trust and cooperation suffer. Growth is a result, not a Cause. It’s an output, not a reason for being. When we have a Just Cause, we are willing to sacrifice our interests to advance it. When we think money or growth is the Cause, we are more likely to sacrifice others or the Cause itself to protect our interests. Besides, nothing can grow forever. All balloons and bubbles eventually burst . . . even financial ones. Corporate Social Responsibility Is Not a Just Cause

The company advertised all the good they did in the community. They shared the stories of some of the people who benefited from the scholarships they funded, for example. They wanted their customers and their employees to know they cared about people. Which would have been great if the 60,000 people who actually worked for the company didn’t have to work in such a top-heavy, dog-eat-dog toxic culture. A corporate social responsibility (CSR) program is not a Just Cause. And a company is not cause driven because they sponsor walkathons, donate to charity or give employees paid time off to volunteer. Nor are they cause driven because they give away their products to people who can’t afford them. CSR programs are, for the most part, business-speak for giving to charity. And though having a CSR program is indeed great and commendable, unless you’re a charity, it’s only a piece of what a company does. The CSR program must be part of the broader strategy to advance the Just Cause. A strategy that includes everything the company does. The way a company makes its money and the way it gives it away must both contribute to advancing the Just Cause. “Cause-related work” is not something an organization does on the side; it is core to their very being. Service is not an ornament. It is a touchstone. And no amount of corporate social responsibility is enough to offset or balance the excessive finite focus that may consume the rest of the corporate culture. Even well-intended finite-minded leaders often have the perspective of “make money to do good.” An infinite perspective on service, however, looks somewhat different: “Do good making money” (the order of the information matters). I will do good in how I treat people and serve my community throughout my life and still build a financially strong organization. It is not so much an equation as it is a lifestyle. These individuals and companies work to be stewards of the lives of those who work for them and for the communities in which they operate. The giving that happens during and at the end

of their lives looks more like a continuation of what they’ve been doing for decades rather than an attempt at balancing the past. The difference is determined by the leaders’ mindset.

Chapter 4 KEEPER OF THE CAUSE S am Walton founded Walmart in 1962 with a simple idea—to serve the average workin’ American by offering “the lowest prices anytime, anywhere.” At the end of his life, Walton described his vision this way: “If we work together, we’ll lower the cost of living for everyone . . . we’ll give the world an opportunity to see what it’s like to save and have a better life.” With Walton at the helm, the decisions that went into building Walmart—from where to locate the stores to how big they would be—were all made with this Cause at the forefront. And as a result, people loved Walmart—both those who worked there and those who shopped in their stores. People wanted Walmart stores in their communities. The business grew, and Walton, who had grown up during the Depression, became one of the richest men in America. And then, somewhere along the way, the Just Cause went fuzzy. By the time Mike Duke took over as CEO in 2009, it was clear that it was no longer the driving force behind the company. Indeed, Walton’s original vision was now little more than marketing slogans and hollow words written on the office walls. The company had become obsessed with profit, growth and dominance at the expense of the very Cause that drove their success in the first place. Mike Duke earned a reputation at Walmart for being an expert in efficiency. When it was announced that Duke would be the next CEO, his predecessor, H. Lee Scott Jr., stammered, “I kind of thought—and I think the board thought—that the company could be better managed.” He went on to explain, “Mike is not only a good leader but a really good manager. . . . I don’t think in business you can forget the fact that you don’t just have to lead, you have to manage.” If the board was

hoping to correct management issues or enhance performance, then giving a man like Mike Duke the reins might have been a perfect choice . . . for the short term. But if the board was concerned that Sam Walton’s Just Cause had been diluted, then a man like Mike Duke was about the worst person to get the company back on track. Duke’s own words when he accepted the position revealed the kind of mindset with which he was going to lead. “[Walmart] is very well positioned in today’s economy, growing market share and returns, and is more relevant to its customers than ever,” he said in the press release announcing his new role. “Our strategy is sound and our management team is extremely capable. I am confident we will continue to deliver value to our shareholders, increase opportunity for our over 2 million associates, and help our 180 million customers around the world save money and live better.” Notice the order of the information? Duke’s first thought was growing market share and returns. Though he talks about being relevant to customers he doesn’t actually mention delivering value to them until the end of his statement. It’s a strange quirk of human nature. The order in which a person presents information more often than not reveals their actual priorities and the focus of their strategies. Where Sam Walton started with the people’s interests, Mike Duke started with Wall Street’s. Under Duke’s leadership, Walmart’s stock price did increase . . . for a while. However, focusing on numbers before people comes at a cost. The once beloved brand also found itself embroiled in multiple scandals over the treatment of their people and their customers. In 2011, Walmart was the target of one of the largest employment discrimination class action suits ever filed, brought by female employees who claimed they were victims of systematic underpayment and underpromotion. In 2012, there were walkouts and protests by workers who demanded to be treated with dignity and respect and paid a livable wage. Where before communities would rally to bring a Walmart into their neighborhoods, now

they were rallying to keep them out. The company’s plans for expansion in Denver and New York, for example, were halted by mass protests. There was also a congressional investigation into allegations that Walmart bribed foreign officials to court favor abroad. Needless to say, morale at the company plummeted and much of the love people had for the stores was replaced with contempt. What happened at Walmart happens all too often in public companies, even the Cause-driven ones. Under pressure from Wall Street, we too often put finite- minded executives in the highest leadership position when what we actually need is a visionary, infinite- minded leader. Steve Ballmer, as we’ve already discussed, was one such example. John Sculley, who replaced Steve Jobs at Apple in 1983, was another. Instead of trying to continue advancing the Cause, Sculley was more focused on competing head-to-head against IBM. The damage he did to the culture seriously hurt Apple’s ability to innovate. In 2000, after being passed over for the CEO job at GE, Robert Nardelli took over at Home Depot (his nickname at GE was “Little Jack,” because of how much he emulated and hoped to succeed Jack Welch as CEO). His relentless drive for cost cutting all but destroyed a culture of innovation at Home Depot. In 2004, the COO, Kevin Rollins, replaced Michael Dell to become CEO of Dell. Focused on growth, he presided over the largest layoffs in the company history, a rise in customer complaints and an SEC investigation over accounting issues. These men were all skilled executives. However, their finite mindsets left them ill qualified for the job they had been given. In fact, Sculley at Apple and Rollins at Dell did such damage to their respective organizations that their more infinite- minded predecessors, Steve Jobs and Michael Dell, were brought back to try to repair the messes they made. The problem isn’t how skilled an executive is when they take over as CEO. The problem is whether they have the right mindset for the job they are given.

We Need a New Title The responsibility of every C-level executive is baked into their title. Chief FINANCIAL Officer. Chief MARKETING Officer. Chief TECHNOLOGY Officer. Chief OPERATING Officer. What they are required to do, what they are required to oversee, is right there in their title. One of the things that title does is to help ensure that we put the right person in the right job. Few would ever consider someone who hates numbers and has never been able to understand a balance sheet for a CFO position. And if you find technology confusing and still have that old VCR connected to your TV at home, odds are you’re not on any short list to be a CTO anytime soon. So it begs the question, what exactly is a Chief EXECUTIVE Officer? The lack of a clear standard for the role and responsibilities of the CEO in our organizations is one of the reasons we find too many leaders of companies playing the finite game when they should at least be thinking about the Infinite Game. In too many cases, it’s that their title hasn’t properly set them up for the job they have. The word “executive” doesn’t tell us what a CEO is responsible for. Words matter. They give direction and meaning to things. Pick the wrong words, intentions change and things won’t necessarily go as hoped or expected. Martin Luther King Jr. gave the “I have a dream” speech, for example. He didn’t give the “I have a plan” speech. There is no doubt he needed a plan. We know he had meetings to discuss the plan. But as the “CEO” of the civil rights movement, Dr. King was not responsible for making the plan. He was responsible for the dream and making sure those responsible for the plans were working to advance the dream. General Lori Robinson, who, when she retired from the Air Force in 2018, was the highest-ranking female officer in the history of the United States military, explains that the responsibility of the most senior person in an organization is to look beyond the organization. “I

will go up and out. I need you to go down and in” is how she framed her responsibility every time she took a new command. If the top person needs to focus on “up and out,” then we need their title to help frame their primary responsibility. Leaders in the Infinite Game will be better equipped to fulfill their responsibilities if they understand that they are stepping into the role of a “Chief Vision Officer,” or CVO. That is the primary job of the person who sits at the pointy end of the spear. They are the holder, communicator and protector of the vision. Their job is to ensure that all clearly understand the Just Cause and that all other C-level executives direct their efforts to advancing the Cause inside the organization. It’s not that an infinite-minded leader is entirely unconcerned with the organization’s finite interests. Rather, as the keeper of the Cause, they take accountability for deciding when short-term finite costs are worth it to advance the infinite vision. They think beyond the bottom line. As the ultimate infinite player, the CVO must go up and out. Next in Line for the Top Job In too many of our companies today, we organize around a single line of hierarchy. The CEO is the number one job and CFO or COO are usually seen as number two. And in the vast majority of businesses, most CFOs or COOs see themselves in line for the “top job.” Michael Dinkins, who worked at GE for 17 years under Jack Welch, explained: I think one of the reasons why a lot of CFOs are being elevated to the CEO role is because the CFO is one of the few positions that sees the total company. Everything that’s going on within the company. . . . They understand processes within the company and the time frame of these processes to happen. . . . They see how HR is recruiting. . . . They see how a manufacturing plant is going to introduce new equipment. . . . They understand the

quality control systems that are over the business. . . . They see the whole company and there’s an advantage to that. Mr. Dinkins’s statement makes sense if we are looking for tactical, finite-minded leadership. But not if what we need is a CVO. A CVO is not an operations or a finance job. Whereas CVOs focus on up and out, CFOs and COOs focus on down and in. One requires eyes on the infinite horizon, the other requires eyes on the business plan. One envisions the very distant, abstract future. The other sees the steps to take in the tangible near term. This is one of the reasons the best organizations are often run in tandem. The combination of the keeper of the vision (CVO) and the operator (the CFO or COO). It is a partnership of complementary skill sets. We are more likely to get these partnerships if we adjust the formal hierarchies in our companies to promote the right mindset to fit the purpose of the job. This means that we need to stop seeing the CEO as number one and the CFO or COO as number two and start thinking of them as vital partners in a common cause. One does not know how to do the other’s job better than they do (which is why they need each other). Remember, Steve Ballmer, John Sculley and Kevin Rollins all thrived when they were working alongside their more infinite-minded partners. Though the CVO is more often in the spotlight, and though the CVO is often given more of the praise, publicly at least, both players must have the strength of ego to know it is a trusted partnership. The CVO knows they cannot advance their vision alone and need someone like Michael Dinkins described by their side. The COO or CFO knows that their skills can work to vastly greater scale and meaning if they are applied to help advance an infinite Just Cause; something bigger than themselves or the company. Such a model has precedence. In the military there are officers and enlisted ranks who work alongside each other. To rise in the enlisted ranks is a different trajectory than a rise in the officer ranks. They are entirely different career paths. There is no conflict of interest when they work together

because the most senior enlisted leader on a base cannot aspire to take the job of the most senior officer, and vice versa. When these partnerships work, the CVO and the COO or the CFO spend more time thanking and celebrating each other than competing for attention. An uncomfortable truth for many CFOs or COOs is that they have already reached the top level of their skill set. They are already the most senior, most skilled finance or operations people in the organization, which is a great thing. Without them, the CVO would not be able to advance the vision. But that doesn’t mean that they are equipped to be at the forefront, leading that vision. For many, once they get the “top job” they are more likely to continue doing what they know and do well—thinking about how big they want their companies to be and what kinds of margins, EBITDA, EPS or market share they aim to achieve (finite pursuits)—than they are to embrace the new responsibility of imagining what the future could look like and how the company might advance a Just Cause (an infinite pursuit). It’s like a salesperson who is promoted to sales manager. They might have excelled at making sales, but they are no longer responsible for selling; they are now responsible for taking care of the people who do the selling. If they fail to shift gears, adjust their mindset and learn a new set of skills for their new responsibility, problems will ensue. Any CFO, COO or other executive can absolutely succeed as CVO if they also learn to adapt to their new role and new responsibilities and embrace an infinite mindset. If they fail to do so, they will likely default to the skills that got them their previous job, which increases the probability that they will steer the company down a very finite path. Whether or not he was qualified to be CVO of Walmart, Duke failed to adjust for the role he was given —he failed to champion Sam Walton’s vision into the next century. In contrast, Duke’s successor, Doug McMillon, could prove to be the CVO that Walmart needs. When his new position was announced in 2013, McMillon said in a press release, “The opportunity to

lead Walmart is a great privilege. Our company has a rich history of delivering value to customers across the globe and, as their needs grow and change, we will be there to serve them. Our management team is talented and experienced, and our strategy gives me confidence that our future is bright. By keeping our promise to customers, we will drive shareholder value, create opportunity for our associates and grow our business.” McMillon presented his priorities in literally the exact opposite order that Mike Duke had when he stepped up to lead the company five years earlier. McMillon put Sam Walton’s vision first. It is exciting to see how he is reequipping Walmart to once again play in the Infinite Game.

Chapter 5 THE RESPONSIBILITY OF BUSINESS (REVISED) B usiness today is subject to a dizzying rate of change. And all that change seems to be taking its toll. The time it takes before a company is forced out of the game is getting shorter and shorter. The average life of a company in the 1950s, if you recall, was just over 60 years. Today it is less than 20 years. According to a 2017 study by Credit Suisse, disruptive technology is the reason for the steep decline in company life span. However, disruptive technologies are not a new phenomenon. The credit card, the microwave oven, Bubble Wrap, Velcro, transistor radio, television, computer hard disks, solar cells, optic fiber, plastic and the microchip were all introduced in the 1950s. Save for Velcro and Bubble Wrap (which are disruptive in a completely different way), that’s a pretty good list of disruptive technologies. “Disruption” is likely not the cause of the challenge, it’s a symptom of a more insidious root cause. It is not technology that explains failure; it is less about technology, per se, and more about the leaders’ failure to envision the future of their business as the world changes around them. It is the result of shortsightedness. And shortsightedness is an inherent condition of leaders who play with a finite mindset. In fact, the rise of this kind of shortsightedness over the past 50 years can be traced back to the philosophies of a single person. In a watershed article from 1970, Milton Friedman, the Nobel Prize–winning economist, who is considered one of the great theorists of today’s form of capitalism, laid out the foundation for the theory of shareholder primacy that is at the heart of so much finite-minded business practice today. “In a free-enterprise, private-

property system,” he wrote, “a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.” Indeed, Friedman insisted that “there is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game.” In other words, according to Friedman, the sole purpose of business is to make money and that money belongs to shareholders. These ideas are now firmly ingrained in the zeitgeist. Today it is so generally accepted that the “owner” of a company sits at the top of the benefit food chain and that business exists solely to create wealth, that we often assume that this was always the way that the game of business was played and is the only way it can be played. Except it wasn’t . . . and it isn’t. Friedman seemed to have a very one-dimensional view of business. And as anyone who has ever led, worked for or bought from a business knows, business is dynamic and complicated. Which means, it is possible that, for the past 40+ years, we have been building companies with a definition of business that is actually bad for business and undermines the very system of capitalism it proclaims to embrace. Capitalism Before Friedman For a more infinite-minded alternative to Friedman’s definition of the responsibility of business, we can go back to Adam Smith. The eighteenth-century Scottish philosopher and economist is widely accepted as the father of economics and modern capitalism. “Consumption,” he wrote in The Wealth of Nations, “is the sole end and purpose of all production and the interest of the producer ought to be attended to, only so

far as it may be necessary for promoting that of the consumer.” He went on to explain, “The maxim is so perfectly self-evident, that it would be absurd to attempt to prove it.” Put simply, the company’s interests should always be secondary to the interest of the consumer (ironically, a point Smith believed so “self-evident,” he felt it was absurd to try to prove it, and yet here I am writing a whole book about it). Smith, however, was not blind to our finite predilections. He recognized that “in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.” In a nutshell, Smith accepted that it was human nature for people to act to advance their own interests. He called our propensity for self-interest the “invisible hand.” He went on to theorize that because the invisible hand was a universal truth (because of our selfish motivations we all want to build strong companies), it ultimately benefits the consumer. “It is not from the benevolence of the butcher, the brewer, or the baker that we can expect our dinner, but from their regard to their own interest,” he explained. The butcher has a selfish desire to offer the best cuts of meat without regard for the brewer or the baker. And the brewer wants to make the best beer, regardless of what meat or bread is available on the market. And the baker wants to make the tastiest loaves without any consideration for what we may put on our sandwiches. The result, Smith believed, is that we, the consumers, get the best of everything . . . at least we do if the system is balanced. However, Smith did not consider a time in which the selfishness of outside investors and an analyst community would put that system completely out of balance. He did not anticipate that an entire group of self-interested outsiders would exert massive pressure on the baker to cut costs and use cheaper ingredients in order to maximize the investors’ gains. If history or 18th-century brogue-tongued philosophers are not your jam, we need simply look at how capitalism changed after the idea of shareholder

supremacy took over—which only happened in the final decades of the twentieth century. Prior to the introduction of the shareholder primacy theory, the way business operated in the United States looked quite different. “By the middle of the 20th century,” said Cornell corporate law professor Lynn Stout in the documentary series Explained, “the American public corporation was proving itself one of the most effective and powerful and beneficial organizations in the world.” Companies of that era allowed for average Americans, not just the wealthiest, to share in the investment opportunities and enjoy good returns. Most important, “executives and directors viewed themselves as stewards or trustees of great public institutions that were supposed to serve not just the shareholders, but also bondholders, suppliers, employees and the community.” It was only after Friedman’s 1970 article that executives and directors started to see themselves as responsible to their “owners,” the shareholders, and not stewards of something bigger. The more that idea took hold in the 1980s and ’90s, the more incentive structures inside public companies and banks themselves became excessively focused on shorter-and-shorter-term gains to the benefit of fewer and fewer people. It’s during this time that the annual round of mass layoffs to meet arbitrary projections became an accepted and common strategy for the first time. Prior to the 1980s, such a practice simply didn’t exist. It was common for people to work a practical lifetime for one company. The company took care of them and they took care of the company. Trust, pride and loyalty flowed in both directions. And at the end of their careers these long-time employees would get their proverbial gold watch. I don’t think getting a gold watch is even a thing anymore. These days, we either leave or are asked to leave long before we would ever earn one. Capitalism Abuse

The finite-minded form of capitalism that exists today bears little resemblance to the more infinite-minded form that inspired America’s founders (Thomas Jefferson owned all three volumes of Smith’s Wealth of Nations) and served as the bedrock for the growth of the American nation. Capitalism today is, in name only, the capitalism that Adam Smith envisioned over 200 years ago. And it looks nothing like the capitalism practiced by companies like Ford, Kodak and Sears in the late 19th and early 20th centuries, before they too fell prey to finite thinking and lost their way. What many leaders in business practice these days is more of an abuse of capitalism, or “capitalism abuse.” Like in the case of alcohol abuse, “abuse” is defined as improper use of something. To use something for a reason other than that for which it was intended. And if capitalism was intended to benefit the consumer and the leaders of companies were to be the stewards of something greater than themselves, they are not using it that way today. Some may say my view—that the purpose of a company is not just to make money but to pursue a Just Cause—is naïve and anticapitalist. First, I would urge us all to beware the messenger. My assumption is that those who most fiercely defend Friedman’s views on business, and many of the current and accepted business practices he inspired, are the ones who benefit most from them. But business was never just about making money. As Henry Ford said, “A business that makes nothing but money is a poor kind of business.” Companies exist to advance something—technology, quality of life or anything else with the potential to ease or enhance our lives in some way, shape or form. That people are willing to pay money for whatever a company has to offer is simply proof that they perceive or derive some value from those things. Which means the more value a company offers, the more money and the more fuel they will have for further advancements. Capitalism is about more than prosperity (measured in features and benefits, dollars and cents); it’s also about progress (measured in quality of life, technological advancements and the

ability of the human race to live and work together in peace). The constant abuse since the late 1970s has left us with a form of capitalism that is now, in fact, broken. It is a kind of bastardized capitalism that is organized to advance the interests of a few people who abuse the system for personal gain, which has done little to advance the true benefits of capitalism as a philosophy (as evidenced by anticapitalist and protectionist movements around the globe). Indeed, the entire philosophy of shareholder primacy and Friedman’s definition of the purpose of business was promoted by investors themselves as a way to incentivize executives to prioritize and protect their finite interests above all else. It is due in large part to Milton Friedman’s ideas, for example, that corporations started tying executive pay to short-term share price performance rather than the long- term health of the company. And those who embraced Friedman’s views rewarded themselves handsomely. The Economic Policy Institute reported that in 1978, the average CEO made approximately 30 times the average worker’s salary. By 2016, the average had increased over 800 percent to 271 times the average worker’s pay. Where the average CEO has seen a nearly 950 percent increase in their earnings, the American worker, meanwhile, has seen just over 11 percent in theirs. According to the same report, average CEO pay has increased at a rate 70 percent faster than the stock market! It doesn’t take an MBA to understand why. As Dr. Stout explains in her book, The Shareholder Value Myth, “If 80 percent of the CEO’s pay is based on what the share price is going to do next year, he or she is going to do their best to make sure that share price goes up, even if the consequences might be harmful to employees, to customers, to society, to the environment or even to the corporation itself in the long-term.” When we tie pay packages directly to stock price, it promotes practices like closing factories, keeping wages down, implementing extreme cost cutting and conducting

annual rounds of layoffs—tactics that might boost the stock price in the near term, but often do damage to an organization’s ability to survive and thrive in the Infinite Game. Buybacks are another often legitimate practice that has been abused by public company executives seeking to prop up their share price. By buying back its own shares, based on the laws of supply and demand, they temporarily increase demand for their stock, which temporarily drives up the price (which temporarily makes the executives look good). Though many of the practices used to drive up stock prices in the short term sound ethically dubious, if we look back to Friedman’s definition of the responsibility of business, we find that he leaves the door wide open for such behavior, even encourages it. Remember, his only guidance for the responsibility companies must obey is to act within the bounds of the law and “ethical custom.” I, as one observer, am struck by that awkward phrase, “ethical custom.” Why not just say “ethics”? Does ethical custom mean that if we do something frequently enough it becomes normalized and is thus no longer unethical? If so many companies use regular rounds of mass layoffs, using people’s livelihoods, to meet arbitrary projections, does that strategy then cease to be unethical? If everyone is doing it, it must be okay. As a point of fact, laws and “ethical customs” usually come about in response to abuses, not by predicting them. In other words, they always lag behind. Based on the common interpretation of Friedman’s definition, it’s almost a requirement for companies to exploit those gaps to maximize profit until future laws and ethical customs tell them they can’t. Based on Friedman, it is their responsibility to do so! Technology companies, like Facebook, Twitter and Google, certainly look like they are more comfortable asking for forgiveness as they run afoul of ethical customs, as opposed to leading with a fundamental view of how they safeguard one of their most important assets: our private data. Based on Friedman’s standards, they are doing exactly what they should do.

If we are using a flawed definition of business to build our companies today, then we are likely also promoting people and forming leadership teams best qualified to play by the finite rules that Friedman espoused— leadership teams that are probably the least equipped to navigate the ethical requirements necessary to avoid exploiting the system for self-gain. Built with the wrong goal in mind, these teams are more likely to make decisions that do long-term damage to the very organizations, people and communities they are supposed to be leading and protecting. As King Louis XV of France said in 1757, “Après moi le dèluge.” “After me comes the flood.” In other words, the disaster that will follow after I’m gone will be your problem, not mine. A sentiment that seems to be shared by too many finite leaders today. The Pressure to Play with a Finite Mindset It’s a big open secret among the vast majority of public- company executives that the theory of shareholder primacy and the pressure Wall Street exerts on them are actually bad for business. The great folly is that despite this knowledge and their private grumblings and misgivings, they continue to defend the principle and yield to the pressure. I am not going to waste precious ink making a drawn- out argument about the long-term impact of what happened to our country and global economies when executives bowed to those pressures. It is enough to call attention to the man-made recession of 2008, the increasing stress and insecurity too many of us feel at work and a gnawing feeling that too many of our leaders care more about themselves than they do about us. This is the great irony. The defenders of finite-minded capitalism act in a way that actually imperils the survival of the very companies from which they aim to profit. It’s

as if they have decided that the best strategy to get the most cherries is to chop down the tree. Thanks in large part to the loosening of regulations that were originally introduced to prevent banks from wielding the kind of influence and speculative tendencies that caused the Great Depression of 1929 to happen, investment banks once again wield massive amounts of power and influence. The result is obvious—Wall Street forces companies to do things they shouldn’t do and discourages them from doing things they should. Entrepreneurs are not immune from the pressure either. In their case, there is often intense pressure to demonstrate constant, high-speed growth. To achieve that goal, or when growth slows, they turn to venture capital or private equity firms to raise money. Which sounds good in theory. Except there is a flaw in the business model of private equity that can wreak havoc with any company keen to stay in the game. For private equity and venture capital firms to make money, they have to sell. And it’s often about three to five years after they make their initial investment. A private equity firm or venture capitalist can use all the flowery, infinite game, Cause-focused language they want. And they may believe it. Up until the point they have to sell. And then all of a sudden many will care a lot less about the Just Cause and all the other stakeholders. The pressure investors can exert on the company to do things in the name of finite objectives can be and often is devastating to the long-term prospects of the company. Long is the list of purpose-driven executives who say that their investors are different, that they do care about the company’s Cause . . . until it’s time to sell. (The ones I talked to asked that I not mention the names of their companies for fear of upsetting their investors.) There is no such thing as constant growth, nor is there any rule that says high-speed growth is necessarily a great strategy when building a company to last. Where a finite-minded leader sees fast growth as the goal, an infinite-minded leader views growth as an adjustable variable. Sometimes it is important to strategically slow

the rate of growth to help ensure the security of the long- term or simply to make sure the organization is properly equipped to withstand the additional pressures that come with high-speed growth. A fast-growing retail operation, for example, may choose to slow the store expansion schedule in order to put more resources into training and development of staff and store managers. Opening stores is not what makes a company successful; having those stores operate well is. It’s in a company’s interest to get things done right now rather than wait to deal with the problems high-speed growth can cause later. The art of good leadership is the ability to look beyond the growth plan and the willingness to act prudently when something is not ready or not right, even if it means slowing things down. From the 1950s to the ’70s, the concept of “forecasting” was considered critical across multiple institutions. Teams of “futurists” were brought in to examine technological, political and cultural trends in order to predict their future impact and prepare for it. (Such a practice may have helped Garmin proactively adapt to advancements in mobile phone technology instead of being forced to react to it.) Even the United States federal government was in on it. In 1972, Congress established the Office of Technology Assessment specifically to examine the long-term impact of proposed legislation. “They’re beginning to realize that legislation will remain on the books for 20 or 50 years before it’s reviewed,” said Edward Cornish, president of the World Future Society, “and they want to be sure that what they do now won’t have an adverse impact years from today.” However, the discipline fell out of favor during the 1980s, with some in government thinking it a waste of money to try to “predict the future.” The office was officially closed in 1995. Though today futurists still exist in the business world, they are usually tasked with helping a company predict trends that can be marketed to rather than assessing future impact of current choices. Finite-focused leaders are often loath to sacrifice near-term gains, even if it’s the right thing to do for the future, because near-term gains are the ones that are

most visible to the market. And the pressure this mindset exerts on others in the company to focus on the near- term often comes at the detriment of the quality of the services or the products we buy. That is the exact opposite of what Adam Smith was talking about. If the investor community followed Smith’s philosophies, they would be doing whatever they could to help the companies in which they invested make the best possible product, offer the best possible service and build the strongest possible company. It’s what’s good for the customer and the wealth of nations. And if shareholders really were the owners of the companies in which they invested, that is indeed how they would act. But in reality, they don’t act like owners at all. They act more like renters. Consider how differently we drive a car we own versus one we rent, and all of a sudden it will become clear why shareholders seem more focused on getting to where they want to go with little regard to the vehicle that’s taking them there. Turn on CNBC on any given day and we see discussions dominated by talk of trading strategies and near-term market moves. These are shows about trading, not about owning. They are giving people advice on how to buy and flip a house, not how to find a home to raise a family. If short-term-focused investors treat the companies in which they invest like rental cars, i.e., not theirs, then why must the leaders of the companies treat those investors like owners? The fact is, public companies are different from private companies and do not need to conform to the same traditional definition of ownership. If our goal is to build companies that can keep playing for lifetimes to come, then we must stop automatically thinking of shareholders as owners, and executives must stop thinking that they work solely for them. A healthier way for all shareholders to view themselves is as contributors, be they near-term or long- term focused. Whereas employees contribute time and energy, investors contribute capital (money). Both forms of contribution are valuable and necessary to help a company succeed, so both parties should be fairly

rewarded for their contributions. Logically, for a company to get bigger, stronger or better at what they do, executives must ensure that the benefit provided by investors’ money or employees’ hard work should, as Adam Smith pointed out, go first to those who buy from the company. When that happens, it is easier for the company to sell more, charge more, build a more loyal customer base and make more money for the company and its investors alike. Or am I missing something here? In addition, executives need to go back to seeing themselves as stewards of great institutions that exist to serve all the stakeholders. The impact of which serves the wants, needs and desires of all those involved in a company’s success, not just a few. The fact is, we all want to feel like our work and our lives have meaning. It’s part of what it means to be human. We all want to feel a part of something bigger than ourselves. I have to believe this contributes to the reason so many companies say they primarily serve their people and their customers when they are in fact primarily serving their executive ranks and their shareholders. For many of us, even if we don’t have the words, the modern form of capitalism we have just feels like something doesn’t align with our values. Indeed, if we all truly embraced Friedman’s definition of business, then companies would have visions and missions that were solely about maximizing profit and we’d all be fine with it. But they don’t. If the true purpose of business was only to make money, there would be no need for so many companies to pretend to be cause or purpose driven. Saying a business exists for something bigger and actually building a business to do it are not the same thing. And only one of those strategies has any value in the Infinite Game. The Drums of Change Are Beating In 2018, Larry Fink, the founder, chairman and CEO of BlackRock, Inc., caused a bit of a stir in the financial

industry when he wrote an open letter to CEOs titled “A Sense of Purpose.” In the letter he urged leaders to build their companies with more idealistic goals than near- term financial gains. “Without a sense of purpose,” he explained, “no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.” BlackRock, incidentally, is the largest money management firm in the world, with over $6 trillion under management. Though the call for companies to embrace a sense of purpose is not new, when someone of Larry Fink’s position in the financial world embraces the concept so publicly, it moves the conversation from articles, books and water coolers to inside palace walls. The stock market works at its best when it works as it was intended, to allow for the average person to share in the wealth of the nation. However, Americans have become disillusioned with the form of capitalism to which they are subjected today and the way the stock market is used as a tool in a finite game. The share of Americans invested in the stock market is at its lowest point in 20 years. The largest exodus has come from the middle class. People don’t mind if an enterprising few make a lot of money. Their exodus is a reaction to the imbalance and a lack of trust in the system . . . and leaders should take notice. The irony is that everyone who works with or for the public markets understands that when the system becomes too unbalanced, there will always be a correction. That correction is often sudden and violent. Our current system of capitalism is so unbalanced, and those on the inside are well advised to make the necessary corrections themselves, for a failure to do so increases the chances of correction being forced upon them. For if the palace refuses to change from within, it increases the chances that the people will try to knock the whole thing down. Be they against government

incompetence, corruption or lopsided economic models, this is what populist uprisings are so often about. Remember the American Revolution itself would have been avoided if Great Britain simply relaxed the economic restrictions it placed on the colonies, gave them greater representation in government and allowed them to share in more of the wealth they helped produce. That’s it. Where there is unbalance, there is unrest. It’s a big deal to disrupt a system. Revolutions are fraught with risk. They are sudden. They are violent. And there is almost always a counterrevolution (and when I talk about revolution, I am not only referring to armed insurgencies, I include all kinds of upending to the status quo). The American colonists chose to revolt only after years of appealing for change. Begging for it. They were only partially drawn to revolution for ideological reasons. They were pushed to it because they saw their lives and their economic well-being suffering or restricted as a result of a gross imbalance of power and wealth. The vision of an alternative future came later. Whether it was in ancient Rome, where the leaders refused to offer citizenship to the allies who suffered to defend Rome, or the American colonists who were refused representation even though their hard work helped fuel the British economy, it is upon the backs of ordinary people that wealth and power are produced. In our modern day and age, it is the employee who bears the most cost for the money companies and their leaders make. They are the ones who must worry every time the company misses its arbitrary projections whether they will be sent home without the means to provide for themselves or their families. It is the employee who comes to work and feels that the company and its leaders do not care about them as human beings (note: offering free food and fancy offices is not the thing that makes people feel cared for). People want to be treated fairly and share in the wealth they helped produce in payment for the cost they bear to grow their companies. I am not demanding it—they are!

The data shows that the current system benefits the top 1 percent of the population disproportionately more than anyone else. In response to that imbalance, a small group of protesters set up camp in Zuccotti Park in New York City in September 2011. They posted signs that said simply, “We are the 99 percent.” Leaderless and unfocused, the occupation of parks around the world fizzled but the movement lives on. The spotlight on the fact that the system was rigged for the few at the expense of the masses has not dimmed. If anything, it has grown brighter. Five years since the start of the Occupy movement we heard the populist message rise to the level of a presidential election from Bernie Sanders on the left and Donald Trump on the right. Both candidates fanned the flames about inequality and unfairness of “the system.” The call to abandon Milton Friedman’s style of business, like any challenge to any status quo, can come from the people or from the leaders. From outside or from inside. Take heed of the red flags all around us. The rise of a populist voice in America and around the world is growing. And all those in a seat of power—be they in business or in politics—are in a position to effect change. But make no mistake, change is coming. Because that’s how the Infinite Game works. This finite system we have now will run itself dry of will and resources eventually. It always does. It always does. Though some may enrich themselves with money or power for now, the system cannot survive under its own weight. If history and almost every stock market crash is any indicator, imbalance is a bitch. The winds of change are blowing. It has become more socially acceptable to question some of the accepted tenets of Friedman’s capitalism. And there continues to be a growing discomfort with such devotion to his definition of the responsibility of business. Organizations like Conscious Capitalism, B Corp, the B Team and others are actively promoting ideas like the stakeholder model or triple bottom line, to challenge Friedman’s ideas. And the business heroes of the high flying 1980s and ’90s, like Jack Welch, are losing their luster and

appeal. It is now self-evident that we need a new definition of the responsibility of business that better aligns with the idea that business is an infinite game. A definition that understands that money is a result and not a purpose. A definition that gives employees and the people who lead them the feeling that their work has value beyond the money they make for themselves, their companies or their shareholders. Friedman proposed that a business has a single responsibility—profit; a very finite-minded view of business. We need to replace Friedman’s definition with one that goes beyond profit and considers the dynamism and additional facets that make business work. In order to increase the infinite value to our nation, our economy and all the companies that play in the game, the definition of the responsibility of business must: 1. Advance a purpose: Offer people a sense of belonging and a feeling that their lives and their work have value beyond the physical work. 2. Protect people: Operate our companies in a way that protects the people who work for us, the people who buy from us and the environments in which we live and work. 3. Generate profit: Money is fuel for a business to remain viable so that it may continue to advance the first two priorities. Simply put: The responsibility of business is to use its will and resources to advance a cause greater than itself, protect the people and places in which it operates and generate more resources so that it can continue doing all those things for as long as possible. An organization can do whatever it likes to build its business so long as it is responsible for the consequences of its actions. The three pillars—to advance a purpose, protect people and generate a profit—seem to be essential in the Infinite

Game. America’s founders inspired a nation to come together to advance Life, Liberty and the pursuit of Happiness. These unalienable rights of physical safety, a cause or ideology to be a part of and the opportunity to provide for ourselves inspired a nation and set the United States on its infinite journey. Nearly 150 years later, on December 30, 1922, the Declaration of the Formation of the Soviet Union was ratified. It stated that the new nation of the USSR was founded on the three promises or rights: “All these circumstances imperatively demand the unification of the Soviet republics into one union state, capable of ensuring both external security and internal economic prosperity, and the freedom of the national development of peoples.” In other words, a nation committed to protect its people, offer an opportunity of economic gain and advance the ideology of communism. A similar trifecta showed up again during the Vietnam War when General Giap rallied the North Vietnamese to join the People’s War with the promise of physical safety, economic advancement and the opportunity to advance an ideology. A People’s War is “simultaneously military, economic and political,” said Giap in an interview years after the war. A nation state must protect its citizens, to ensure that we live free from fear. To do that, it must maintain armed forces to defend against foreign threats, establish justice and insure domestic tranquillity. Likewise, inside an organization, a company must provide for the protection of its people by building a culture in which employees feel psychologically safe and feel like their employer cares about them as human beings. We want to know that the company is invested in our growth as much as it is its own. No one should have to come to work in fear of the annual round of layoffs simply because the company missed an arbitrary projection. A company can provide for the safety and protection of those outside its walls by considering how the manufacturing of its products and the ingredients they choose impact the communities in which those products are made or sold.

For nations, our sense of belonging and ideologies that we would sacrifice to advance often come in the form of -isms, like capitalism, socialism and so on. In business, they come in the form of a Just Cause. In both the place we choose to live and the place we choose to make a living, we should feel like we are working to advance something bigger than ourselves. Among nations, profit matters. Economic prosperity is the ability for the nation to remain solvent. To maintain a strong economy that is well resourced to thrive in good times and survive in lean times. For businesses, it is the same. And both in nations and in companies, everyone wants the opportunity to work hard and earn an income so that we may provide for ourselves and our families. The goals of a nation founded with an infinite mindset are also the people’s goals. A nation exists to serve and include ordinary people as it strives forward. This is what makes us feel emotionally connected to our country, why we feel patriotic. Translated into business terms, it means that a company’s goals must also align with people’s goals, not simply the goals of shareholders. If we want our work to benefit ourselves, our colleagues, our customers, our communities and the world, then it is right for us to work at companies whose values and goals align with our own. And if they don’t, we can demand that they do. Anyone who offers their blood, sweat and tears to advance a company’s goals is entitled to feel valued for their contributions and share in the fruits of their labor. Where Friedman believed the results of our hard work should be for the primary benefit of an elite ruling class (the owner), the more infinite-minded leader would ensure that, so long as there are shared goals, all who contribute will benefit across all three pillars. We are all entitled to feel psychologically protected at work, be fairly compensated for our effort and contribute to something bigger than ourselves. These are our unalienable rights. Business, like any infinite pursuit, is a more powerful force when it is empowered for the

people, by the people. Disruption is not going away anytime soon, that’s not going to change. How leaders respond to it, however, can. Where Friedman’s finite definition of the responsibility focuses on maximizing resources, a revised infinite definition also considers the will of the people.

Chapter 6 WILL AND RESOURCES T he Four Seasons in Las Vegas is a wonderful hotel. The reason it’s a wonderful hotel is not because of the fancy beds. Any hotel can buy fancy beds. The reason the Four Seasons is a wonderful hotel is because of the people who work there. If you find yourself walking through the halls and an employee says hello, for example, you get the distinct feeling that they wanted to say hello, not that they were told to say hello. Human beings are highly attuned social animals; we can tell the difference. There happens to be a coffee bar in the lobby of the hotel. One afternoon while on a business trip in Las Vegas, I went to buy myself a cup of coffee. The barista working that day was a young man named Noah. Noah was funny and engaging. It was because of Noah that I enjoyed buying that cup of coffee more than I generally enjoy buying a cup of coffee. After standing and chatting for a while, I finally asked him, “Do you like your job?” Without skipping a beat Noah immediately replied, “I love my job!” Now, for someone in my line of business, that’s a significant response. He didn’t say, “I like my job,” he said, “I love my job.” That’s a big difference. “Like” is rational. We like the people we work with. We like the challenge. We like the work. But “love,” love is emotional. Love is something harder to quantify. It’s like asking someone “Do you love your spouse,” and they respond, “I like my spouse a lot.” It’s a very different answer. You get my point, love is a higher standard. So when Noah said, “I love my job,” I perked up. From that one response, I knew Noah felt an emotional connection to the Four Seasons that was bigger than the money he made and the job he performs.

Immediately, I asked Noah a follow-up question. “Tell me specifically what the Four Seasons is doing that you would say to me that you love your job.” Again without skipping a beat, Noah replied, “Throughout the day, managers will walk past me and ask me how I’m doing, ask me if there is anything I need, anything they can do to help. Not just my manager . . . any manager. I also work for [another hotel],” he continued. He went on to explain that at his other job the managers walk past and try to catch people doing things wrong. At the other hotel, Noah lamented, “I keep my head below the radar. I just want to get through the day and get my paycheck. Only at the Four Seasons,” Noah said, “do I feel I can be myself.” Noah gives his best when he’s at the Four Seasons. Which is what every leader wants from their people. So it makes sense why so many leaders, even some of the best- intentioned ones, often ask, “How do I get the most out of my people?” This is a flawed question, however. It’s not a question about how to help our people grow stronger, it’s about extracting more output from them. People are not like wet towels to be wrung out. They are not objects from which we can squeeze every last drop of performance. The answers to such a question might yield more output for a time, but it often comes at a cost of our people and to the culture in the longer term. Such an approach will never generate the feelings of love and commitment that Noah has for the Four Seasons. A better question to ask is, “How do I create an environment in which my people can work to their natural best?” Too often, when performance lags, the first thing we do is blame the people. But in Noah’s case, he is the same person in both his jobs. The only difference is the leadership environment in which he is asked to work. Had I met Noah at the other hotel, where his output was prioritized over how supported he felt, my experience with him would have been totally different. The odds are high I would neither be writing about him nor singing the praises of the other hotel. It’s not the people doing

the job, it’s the people who lead the people doing the job who can make the greater difference. Noah’s managers at the Four Seasons understand that their job is to set an environment for Noah in which he can naturally thrive. Leaders will work to create these environments when we train them how to prioritize their people over the results. And this is the true definition of what it means to lead. There is absolutely zero cost for a manager to take time to walk the halls and ask their people how they are doing . . . and actually care about the answers. Because the leadership at the Four Seasons prioritizes the will of their people before the resources they can produce, the people who work there want to give their jobs their all and the guests of the Four Seasons can feel it. Will Before Resources In any game, there are always two currencies required to play—will and resources. Resources are tangible and easily measured. When we talk about resources, we’re usually talking about money. And depending on an organization’s preferences or the standards of the day, those resources can be counted in multiple ways— revenues, profit, EBITDA, EPS, cash flow, venture capital, private equity, stock price and so on. Resources generally come from outside sources, like customers or investors, and represent the sum of all the financial metrics that contribute to the health of the organization. Will, in contrast, is intangible and harder to measure. When we talk about will, we’re talking about the feelings people have when they come to work. Will encompasses morale, motivation, inspiration, commitment, desire to engage, desire to offer discretionary effort and so on. Will generally comes from inside sources like the quality of leadership and the clarity and strength of the Just Cause. Will represents the sum of all the human elements that contribute to the health of the organization.

All leaders, whether operating with a finite or infinite mindset, know resources are essential. And both finite- and infinite-minded leaders agree that will is also essential. I have yet to meet any CEO who thinks their people are unimportant. The problem is, will and resources can never be equally prioritized. There are always circumstances in which one is pitted against the other, times in which a leader must choose which one they are willing to sacrifice. The question is, which one will they choose? Every leader has a bias. Most of us have sat in a meeting and listened to a leader present their priorities . . . and it often looks something like this: 1. Growth. 2. Our customers. 3. Our people. Though that leader will insist that they do care about their people (“our people” is one of their priorities), the order in which they appear on the list matters. In this case, there are at least two things that are considered more important than the people, and one of them is resources. How a leader lists their priorities reveals their bias. And their bias will influence the choices they make. The finite-minded leader tends to show a bias for the score. As a result, they often opt for choices that demonstrate results in a short time frame, even if doing so, “regrettably,” comes at a cost to the people. These are leaders who, during hard times, for instance, will turn first to layoffs and extreme cost cutting measures rather than explore alternatives that may not demonstrate the same immediate results, even if they have longer-term benefits. If a leader has a bias for resources, it is much easier for them to calculate the immediate savings of reducing 10 percent of their workforce next week than it is to choose an option in which the savings take longer to hit the balance sheet. Infinite-minded leaders, in contrast, work hard to look beyond the financial pressures of the current day and put people before profit as often as possible. In hard times, they are less likely to look at their people as just another expense to be cut and more willing to explore other ways to save money, even if the results may take

longer to realize. The infinite-minded leader may opt for furloughs instead of layoffs to help manage the resources; for example, requiring every employee to take two or three weeks of unpaid time off. Though people may be asked to sacrifice some money, everyone keeps their job. When a group shares in the suffering, it actually brings a team together. It is the same reason people come together after a natural disaster. However, when some are forced to bear an unbalanced amount of the burden, it can rip a culture apart. Thinking beyond the hard times, an infinite-minded leader is okay to wait the quarter or the year or more for the savings to accumulate if it means safeguarding the will of the people. They understand that the will of their people is the thing that drives discretionary effort, as well as problem solving, imagination and teamwork—all things essential for surviving and thriving in the future. The value of strong will over resources simply cannot be underestimated. Indeed, it was the will of the North Vietnamese people that was central to General Giap’s strategy to push the superior-resourced American forces out of Vietnam. Still, when those with a bias for the resources hear folks like me talk about the need to put people before profit, the hair on the back of their necks stands up. What they hear is that I think the money is not important. False. What they hear is that I don’t think they care about their people. Also false. It’s not an either- or choice. The bias doesn’t even need to be extreme. Danny Meyer, the famed restaurateur and founder of Shake Shack, shared his bias when he said his business is 49 percent technical and 51 percent emotional (the restaurateur’s take on will and resources). Even a small bias for will before resources is more likely to create a stronger culture in which will and resources will both be in ample supply for the long game. The Cost of Will

Too many leaders “see people as a cost,” says former CEO of Burberry and former senior vice president of retail for Apple Angela Ahrendts. Especially in retail, which suffers from such high turnover rates, the common logic is, “Why invest in people who aren’t gonna stick around?” This is a one-dimensional and finite view of the way business works. Focusing on the money they can save by not investing in their people, too many finite- minded leaders overlook the additional costs they actually incur when they don’t. Hiring new people to fill the empty slots costs money. Losing experienced staff and waiting for people to get trained and adjust to a new culture all affect productivity. Add in the low morale in high-turnover jobs, and it makes one curious whether the money saved was actually worth it. Ahrendts was curious too. So she ran the numbers. And what she discovered surprised even her. The actual incremental cost of Apple taking care of their people was: zero. Apple gives all full-time retail employees the same benefits as full-time employees who work at corporate, including full medical and dental coverage and $2,500 in education reimbursement should they wish to take classes outside work. Apple was one of the first companies to offer new hires a $15-per-hour minimum wage and gives full-time retail employees the same option to buy stock in the company as any other corporate employee. All these additional costs are offset by the money the company saves from lower recruiting and training costs, which most firms that overuse layoffs are forced to pay to refill positions at later dates (costs that are often not included when executives report how much money they saved with a round of layoffs). And unlike many large retailers who have to maintain a huge staff of recruiters to work continually to replace the people who leave, Apple only needs a very lean recruiting staff for their retail operations. Of course, some would argue that Apple makes a lot more money per employee compared to most retail operations and so they can afford to pay higher wages. However, Costco, which pays their cashiers an average of $15.09 (in addition to offering a 401(k) and health insurance), has found that

they make up for the additional cost because of reduced turnover and higher productivity. Plus, customers tend to enjoy better service when employees feel looked after, which likely translates into higher average sales. If the actual costs are net neutral, then the difference in how we treat people is simply a matter of mindset. And it is because of that alternative mindset that Apple and Costco enjoy average retention rates around 90 percent, when the average in the rest of retail is 20 to 30 percent. Where finite-minded organizations view people as a cost to be managed, infinite-minded organizations prefer to see employees as human beings whose value cannot be calculated as if they were a piece of machinery. Investing in human beings goes beyond paying them well and offering them a great place to work. It also means treating them like human beings. Understanding that they, like all people, have ambitions and fears, ideas and opinions and ultimately want to feel like they matter. It may feel like a risk to many a finite-minded leader. To shell out all that extra money with the “hope” that it works out. Lower wages and fewer benefits are simply easier to calculate. However, it may be worth the risk. When companies make their people feel like they matter, the people come together in a way that money simply cannot buy. When Will Is Strong His banker and his entrepreneur friends warned him not to do it. They told him that if the company went forward with the plan that the employees would hate it. “They will leave,” his friends said. However, the CEO also spent time talking to various people within the company to get their input before making a decision. And they all agreed. The company should implement a salary freeze and stop matching 401(k)s. During the 2008 recession, when people were tightening their belts in hard economic times, many chose to put off buying nonessential items, like storage

and organization products for their homes and offices. And The Container Store, the only national retailer solely devoted to storage and organization products for our homes and offices, felt it. Their sales dropped 13 percent. This presented a problem for a company unaccustomed to dips in revenue. They had enjoyed a compounded annual growth rate of 20 percent from when they first opened their doors in 1978. Leadership talked to some of the employees and concluded they had to cut their expenses by at least the same amount as the drop in sales. To add to the stress, no one knew how long the recession would last or how long sales would continue to drop. The Container Store has always prided itself on being an employee-first kind of company. So when the recession hit, they refused to take the expedient route and lay off employees. But they had to do something. As they presented the plan to freeze salaries and 401(k) matches for an undetermined time period, leadership wasn’t sure what to expect in response. They hoped their people would be understanding and agree that it was better that they should all share the hardship than ask a few to suffer more. What actually happened surprised and delighted them beyond their expectations. Something happened that they had neither requested nor demanded. Not only did the people accept the pay freezes, they also took it upon themselves to find more ways to help save money. Though not required to, people who traveled for business downgraded their hotels—opting for a Hampton Inn over a Hilton, for example. Some stayed with friends and family, foregoing hotels altogether. Others simply didn’t submit expense reports, opting instead to pay for their own meals and taxis while away. Any and every place they could save money, they did. Employees also reached out to vendors to ask if they could find ways to save the company money too. Amazingly, the vendors were eager to help. That’s practically unheard of! Clearly, they were under no obligation to trim their prices just to help a customer that was feeling the crunch of hard times. But

because The Container Store had such strong relationships with their suppliers, they wanted to help. “Top down couldn’t have been even half as effective,” says Kip Tindell, the company’s cofounder and former CEO. And he’s right. A company’s leadership can demand that employees downgrade their hotels, pressure their people to insist that vendors find savings and announce that they will no longer reimburse business trip expenses. And if they did those things, they would indeed save money . . . and also risk inciting mass rebellion. Lesser demands have been known to stir up silent and seething anger toward companies and their leadership. At The Container Store, because the desire to contribute came from the people themselves, the outcome was quite different. There was an electricity in the air. Morale ran high. People were excited to find ways to help. Most important, everyone felt like they were in it together. Very often, finite-minded leaders believe the source of will is externally motivated—pay packages, bonuses, perks or internal competition. If only that’s all it took to inspire a human being. Money can buy a lot of things. Indeed, we can motivate people with money; we can pay them to work hard. But money can’t buy true will. The difference between an organization where people are extrinsically rewarded to give their all and one where people are intrinsically motivated to do so is the difference between an organization filled with mercenaries versus one filled with zealots. Mercenaries work hard only so long as we keep paying top dollar for their effort. There is little loyalty to the company or the team. There is no real sense of belonging or feelings that anyone is contributing to something larger than themselves. Mercenaries are not likely to sacrifice out of love and devotion. In contrast, zealots love being a part of the organization. Though they may get rich doing what they are doing, they aren’t doing it to get rich. They’re doing it because they believe in the Just Cause. At The Container Store, Tindell says, “Our employees put the cause before themselves.” Though important, it

was not the Just Cause alone, however, that inspired the will of the people. What Tindell saw during the recession was the payoff on a long-term investment. Tindell remembers what happened during the 2008 recession as a display of “spontaneous love and devotion.” It may have felt spontaneous to him, but it wasn’t. Strong will cannot be built overnight and it doesn’t come from nothing. For years The Container Store had provided a great place to work, paid frontline employees better than most other retail jobs and trained leaders to put people’s personal growth before the company’s financial growth. And for years, their people had, in turn, taken care of their customers, the company and their vendors. And now, with the company in trouble, the people and the vendors wanted to do what was right by the company. How we treat people is how they treat us. One reason companies that operate with a bias for will ultimately fare better in the Infinite Game has to do with what we can control. Though we have control over how we spend or manage our money, we have a lot less control over how we make it. Politics, economic cycles, market fluctuations, the actions of other players, customer preferences, technological advancements, the weather and all other forces majeures can wreak havoc with our ability to amass resources. Leaders can exert only limited control over any of these things. However, leaders have near total control over the source of will. Will is generated by the company culture. Unlike resources, which are ultimately limited, we can generate an endless supply of will. For this reason, organizations that choose to operate with a bias for will are ultimately more resilient than those who prioritize resources. When hard times strike (and hard times always strike), in companies with a bias for will, the people are much more likely to rally together to protect each other, the company, the resources and their leaders. Not because they are told to, but because they choose to. This is what happens when the will of the people is strong. “We built a sense of family—of love and loyalty to each other, our customers, vendors and communities.

Our intention was to build a business where everyone associated with it thrives,” says Tindell.

Chapter 7 TRUSTING TEAMS W hat is this for?” asked George. “This has nothing to do with the oil field.” This was the general consensus from the rest of the people in the room too. They were to be the crew for the Shell URSA, the biggest offshore deepwater drilling platform the Shell Oil Company had ever built and they had no time for this “workshop.” The Shell URSA would stand forty-eight stories tall and would be capable of drilling deeper than any other platform in the world, more than three thousand feet below the surface of the ocean. At the time, 1997, it cost $1.45 billion to build (about $5.35 billion in today’s dollars). Given how massive and expensive an operation it was, it presented all kinds of new challenges and dangers, so Shell wanted things done right. Which is why they handpicked Rick Fox as the man to lead the job. Fox was a tough guy’s tough guy. Hard and confident. He was intolerant of weakness. He felt he had every right to be. This was one of the most dangerous jobs in the world. One false step, a glance in the wrong direction and in an instant a man could be ripped in two and killed by one of the heavy moving parts. He knew so—he’d seen it happen. Safety was Fox’s number one concern . . . that, and making sure that the URSA operated at peak capacity, pulling as many barrels of oil out of the ocean floor as it could handle. Off in Northern California, far from Shell’s New Orleans headquarters, lived a woman named Claire Nuer. A Holocaust survivor, Nuer operated a leadership consulting practice. She heard about the Shell URSA and, always looking for opportunities to share her philosophies, cold-called Rick Fox. When Nuer asked Fox about the challenges he faced, he spent most of the time telling her about the technical challenges. After letting

him explain all the complexities of running a deep-sea rig, Nuer made a rather unusual proposal. If Fox really wanted his crew to be safe and succeed in the face of all the new challenges, his crew would need to learn to express their feelings. Such an idea must have sounded ooey-gooey and New Agey. It must have sounded like it had no place in any serious, performance-driven organization. If it were any other time, Fox, a man who believed expressing feelings was the same as expressing weakness, might have hung up the phone. But Nuer got lucky. For some reason, perhaps because he was struggling with a strained relationship with his son, Fox listened to what she had to say. He even accepted an invitation to fly to California with his son to attend one of her workshops. There, father and his son were offered a safe space to open up about how they felt about each other. The workshop had such a profound and positive impact on their relationship that Fox wanted others to experience it too. He hired the Northern California, hippie type to fly across the country and test her theories with his roughneck, calloused, Louisiana crew. He knew they would be cynical and laugh at what he was asking them to do. But Fox cared about his crew, and he knew that any humiliation or mockery he would have to endure would be short lived compared to the benefit they would gain. And so the experiment began. Day after day, for hours, members of the URSA crew would sit in circles and talk about their childhoods and their relationships. Their happy memories and their not- so-happy memories. On one occasion, a crew member broke down in tears as he told his teammates about his son’s terminal illness. Crew members were not only asked to talk about themselves, there were also asked to listen. Another crew member recalled being prompted to ask the group, “If there was one thing you could change about me, what would it be?” “[You] don’t listen,” they told him, “you talk too much.” To which he could only reply, “Tell me more.” The members of Fox’s team got to know each other on a deeper level than ever before. Not just as coworkers but

as humans. They opened up about who they were versus who they pretended to be. And as they did, it became clear that, for most of them, the tough-guy personas they projected were just that—personas. Under their hard exteriors, like all people, they had doubts, fears and insecurities. They had just been hiding them. Over the course of a year, Rick Fox, with Claire Nuer’s guidance, built a team for the Shell URSA whose members felt psychologically safe with each other. There is a difference between a group of people who work together and a group of people who trust each other. In a group of people who simply work together, relationships are mostly transactional, based on a mutual desire to get things done. This doesn’t preclude us from liking the people we work with or even enjoying our jobs. But those things do not add up to a Trusting Team. Trust is a feeling. Just as it is impossible for a leader to demand that we be happy or inspired, a leader cannot order us to trust them or each other. For the feeling of trust to develop, we have to feel safe expressing ourselves first. We have to feel safe being vulnerable. That’s right, vulnerable. Just reading the word makes some people squirm in their seats. When we work on a Trusting Team we feel safe to express vulnerability. We feel safe to raise our hands and admit we made a mistake, be honest about shortfalls in performance, take responsibility for our behavior and ask for help. Asking for help is an example of an act that reveals vulnerability. However, when on a Trusting Team, we do so with the confidence that our boss or our colleagues will be there to support us. “Trust is the stacking and layering of small moments and reciprocal vulnerability over time,” says Brené Brown, research professor at the University of Houston in her book Dare to Lead. “Trust and vulnerability grow together, and to betray one is to destroy both.” When we are not on a Trusting Team, when we do not feel like we can express any kind of vulnerability at work, we often feel forced to lie, hide and fake to compensate. We hide mistakes, we act as if we know what we’re are doing (even when we don’t) and we would never admit we